Money Coach: Myth vs. Fact In Cost Cutting Tips
So now, you've heard the news confirming what you probably already know. Prices may be going up, but that doesn't necessarily mean you'll be getting extra money in your paycheck. So how do you cope? Should you turn off the cable? Sell your car? Grow your own vegetables? We've called on financial expert Alvin Hall to explore some of the ways to cope in the current economy. Good to have you with us, Alvin.
Mr. ALVIN HALL (Financial expert): I'm glad to be here.
NEARY: Now, you've heard our conversation with Professor William Sprigs.
Mr. HALL: Yes.
NEARY: How serious is this situation for the average consumer?
Mr. HALL: Quite serious. People are going to the supermarket and seeing the cost of goods they buy every week going up by 20 or 25 percent. They see the price of gas increase substantially. Some firms are allowing employees to work only four days a week instead of five in order to cut back on the cost of fuel. And you see people going to stores, and things like paper towels, the price is so astronomical that you just think, where can I turn? So people have to come up with new strategies in order to make their money stretch further.
NEARY: Yeah. Now, sometimes, when people decide to cut back, their plans can backfire. Let's talk about what's realistic. For example, someone might say, OK, I'm going to bring my lunch to work instead of buying it at work. So they go out. They got a lot of food to make lunch. Then they run out of time. They go to work. They buy it anyway.
Mr. HALL: Exactly. What most people don't do when they start to cut back, they never sit down and actually write down a plan. Instead, they do this in their heads, and as always, when you carry something in your head, it tends to morph over time or be subject to shifts in our mood. I tell everybody, you need to write down a plan by which you will cut your cost. By seeing it in black and white and even carrying it around with you, you'll be able to more effectively implement those strategies and stick to them.
NEARY: All right, let's get you to help us think about a plan.
Mr. HALL: OK.
NEARY: For instance, what about transportation? A lot of people might think, let me give up driving for public transportation. Is that always cost saving?
Mr. HALL: Generally, it is. But it means that you have less flexibility in your schedule, and you have to hold to the times that the buses or the trains move. This can be a good thing for some people because it will take them out of harms' way of shopping. They won't be able to say, oh, let me just drive over to this mall and see what's on special here.
On the other hand, if you have childcare involved, it creates another problem because generally, you have to pick up your children by a particular time. So it's plus or minus depending upon your lifestyle. Overall, carpooling or using public transportation is less costly, but it can at times be less convenient.
NEARY: And what about entertainment? Our instinct might be, let me cut back on my cable. But then I might be spending more money at the movie theater when the weekend rolls around.
Mr. HALL: Exactly. You're speaking to me here because I have just done this recently. I've started using cable more than I ever did before because of the cost of the movies. I can really stay at home and see the movie and be happy even though it's a little bit dated. I don't have to see Batman when it first comes out to the theater. I can wait a couple of weeks and have friends over, and we can also share the cost of it, and it'd be a nice evening with a meal.
Another thing I tell people, when they go shopping at supermarkets, you should plan that shopping much more carefully and take advantage of specials, which means this time of year that your weekly shop will vary depending upon what's on special. I've implemented this.
When I went to the store and saw that my food bill per week went up - and I was shocked by this, Lynn - 32 percent. And a lot of that was paper goods, soap and detergent, things that I to have buy every week. So now, my food budget shifts depending upon what's on special offer at the supermarket. It's a challenge sometimes because I have to learn to cook things I have not cooked before. But at least you can keep your budget in line by doing that.
NEARY: What if you're not really good at budgeting? Is it worth it to spend a little money at the start to go and get some help from a financial professional who might help you sort these things out? What really is the best thing for you to do?
Mr. HALL: I am not necessarily a fan of getting a financial professional to help you budget. I think you can go to your bank or someone you know and sit down and talk to an uncle or relative. Why pay the money when you can go to a bookstore for 15.95 or 20 dollars get a book that explains budgeting to you?
The major problem that most people have with budgeting is that they see it in exactly the same emotional form as dieting. They do! They think, I'll never be able to eat that piece of chocolate cake again for the rest of my life! Right? They see the extreme of it. They don't see the fact that, by sitting down and writing down everything that you have to spend, those fixed expenditures, those discretionary spending, and those things that you want and then prioritizing them, that it gives you a better chance of staying in control.
But they always see it as the thing they won't be able to have. That wonderful Egg McMuffin in the morning or that wonderful latte in the afternoon. That's how people see it. But they need to realize, be practical. Write it down, then prioritize, then come up with a strategy to keep yourself in line.
NEARY: And think about your own lifestyle when you're making these decisions, what's important to you and what works for you.
Mr. HALL: Absolutely. I mean, in my case, I don't drive. So because of petrol or fuel, it's not that big of deal in my life except for heating my apartment, and since I live in a big building, I pay part of that cost.
What really shocks me is that I like to eat good food, so I've had to change that way in my life or when I go to the drugstore to buy things I use everyday to clean the house. I have had to shift that and use more coupons to buy those things to keep my overall spending and budget. All you need to do is to look at your lifestyle and then adjust your spending in the areas that are most effective and easiest for you to implement.
NEARY: Alvin Hall is a financial expert. He joined us from our bureau in New York. Alvin, good talking to you.
Mr. HALL: Always good talking to you, Lynn.
NPR transcripts are created on a rush deadline by a contractor for NPR, and accuracy and availability may vary. This text may not be in its final form and may be updated or revised in the future. Please be aware that the authoritative record of NPR's programming is the audio.